For many, their student loan payment is a large expense each month. Rather than contributing to their retirement funds at work, they sacrifice long term planning to make sure the student loan payment is made each month. In this week’s Wall Street Journal, Anne Tergesen has another good article that breaks down a new perk for employees:

Matching Student Loan Repayments with Contributions to a 401(k) plan

It’s an interesting new perk to add for employees. Especially for those new graduates saddled with significant student loan debt, it’s a creative way to reinforce the importance of retirement planning as they begin their careers. Even new graduates in their 20’s should consider getting a will drafted as they begin their careers.

Student Loan Debt and Workers

The statistics on our educational debts are staggering:

  • Americans have $1.5 trillion of educational debt, up from $346 billion in 2004;
  • After mortgages, student loans are the second-largest debt category;
  • More than 2/3 of recent graduates have student loans; and
  • The average balance for the loans is $29,900.

The debt has a significant impact on the well-being of employees, their ability to focus and their retirement planning according to Carl Gagnon, an assistant vice president at Unum Group. For workers born between 1980 and 1984, those with student loan debt had 50% less in their 401(k) plans by age 30 according to the Boston College Center for Retirement Research.

The trend to help employees with student loan payments is part of a broader campaign. Employers have increased their efforts to help out their employees to get their financial houses in order. Many employers offer access to legal plans that provide for payment of their legal bills for a variety of matters, including creating a will. They may also offer budgeting tools and cash to help the employee start an emergency fund.

According to Fidelity Investments, these programs work. They have seen a 75% reduction in turnover for employees who participate in their student loan repayment program. And half of their new hires said that the benefit was “a major factor in their decision” to work for Fidelity.

For employers, this may be a new benefit that makes a lot of sense to offer to your employees. In the companies that have tried it, the results seem positive and are getting new employees off to a better financial foundation as they begin their careers.

For employees, if you see this benefit offered by a prospective employer, it may be a good reason to give that offer significant consideration.

Post A Comment